Chapter 8: E8-3 & BYP 8-1

E8-3 Direct materials Direct labor Manufacturing Overhead Total Unit Costs 20% markup percentage on total cost. Per unit $25.00 $30.00 45.00 $ 100.00

(a) (1) Total Unit Costs + Total Unit Costs Mark-Up % = Target Selling Price $120.00

$100.00

$100.00

20%

(a) (2) Hannon would only consider manufacture the All-Body swimsuit if it could the each unit for $120 a piece. At their current costs, Hannon would not make a profit given the department initially estimated the unit would sell for $100. (b) Assuming target costing, Hannon would charge the retailer $100 per swimsuit. (c) The highest manufacturing costs Hannon would be willing to incur to produce the swimsuit is $80. Market Price Desired Profit = Target Costs

$100.00 BYP 8-1 Labor

$20.00

$80.00

Annual Wages $ $ $ $ 30,000 10,000 10,000 50,000

Labor Hours 2,000 2,000 2,000

Repair Technician Fringe Benefits Overhead Total Hourly Costs

Profit Margin Rate Charged Per Labor Hour Required Work Hours Total Labor Costs

Total Per Hour Labor Costs $ 15.00 $ 5.00 $ 5.00 $ 25.00 $ 20.00 $ 45.00 $ 3.00 $ 135.00

Materials Materials $

Costs 100

Total Loading Charge Materials 50% $ 150 $ $ $ 135 150 285

Total Labor Costs Total Material Costs Total Price Charged By Current Designs